MRF: Tired performance - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

MRF: Tired performance

Dec 24, 2001

The performance of MRF Limited, the market leader in the Indian tyre segment, reflects the downturn in the auto industry. Both sales and profits have nose-dived in light of slowdown in the economy. It must be noted that MRF is a September year ending company.

(Rs m)FY00FY01Change
Sales 19,038 17,140 -10.0%
Other Income 55 40 -26.4%
Expenditure 16,408 15,192 -7.4%
Operating Profit (EBDIT) 2,630 1,948 -25.9%
Operating Profit Margin (%)13.8%11.4% 
Interest 643 557 -13.4%
Depreciation 1,078 944 -12.5%
Profit before Tax 964 487 -49.4%
Tax 323 170 -47.4%
Profit after Tax/(Loss) 641 317 -50.5%
Net profit margin (%)3.4%1.9% 
No. of Shares (m) 4.2 4.2  
Diluted Earnings per share* 152.5 75.6  
P/E Ratio  8.7  

MRF is India’s largest tyre manufacturer with a market share of 22%. The company derives over 95% of its revenues from its tyre business, the rest coming from its presence in toys and paints. It is a key player in the Original Equipment Manufacturer (OEM) segment.

Auto industry in FY01
(% change)ProductionSales
Multi Utility Vehicle1.3%2.8%
M & HCV's-21.5%-21.3%
TOTAL (4 wheelers)-10.6%-7.0%

MRF's sales fell by 10% to Rs 17,140 m for FY01. While overall four wheeler sales registered a decline of 7% in sales, this was primarily led by a sharp fall in passenger cars and heavy commercial vehicles segment, that account for a bulk of the industry volume. MRF being a key supplier to most of the auto majors was affected by the slowdown.

Also, prices of one of the key raw materials used in manufacture of tyres, carbon black, went up sharply in FY01 due to higher crude prices. Carbon black manufacturers, both in India and globally, raised prices to pass on the increase in costs to the customers. To put things in perspective, Indian Rayon, one of the market leaders in the Indian carbon black industry raised prices by 19% to Rs 27,000 per tonne (US$ 563 per tonne) in FY01. This along with other factors like lower CV demand, competition in the retail segment (domestic as well as imports) has exercised a downward pressure on margins. As a result, operating profit fell by 26% in FY01. The fall in net profits would have been sharper if not for lower interest and depreciation costs.

The prospects for the current year are also challenging. Competition has intensified in the tyre industry with the entry of multinationals like Bridgestone and Michelin. Multinational auto companies, who have presence in India, increasingly prefer these companies on account of their global relationships. There has also been undercutting of prices in recent years in an attempt to boost volume growth. Apollo, for example, had reduced radial tyre prices by almost 25% last year. MRF also has to contend with threats of cheaper imports, which are only going to be cheaper in the coming years. Though passenger car sales have shown signs of improvement in recent months, given the slowdown in the economy, one has to see if volume growth sustains for the rest of the year. However, being a market leader in the tyre segment coupled with its brand equity, MRF is expected to report a improved performance for FY02. MRF currently trades at Rs 659 implying a P/E multiple of 8.7x FY01 earnings.

Equitymaster requests your view! Post a comment on "MRF: Tired performance". Click here!


More Views on News

MRF 2020-21 Annual Report Analysis (Annual Result Update)

Oct 18, 2021 | Updated on Oct 18, 2021

Here's an analysis of the annual report of MRF for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of MRF. Also includes updates on the valuation of MRF.

7 Indian Companies that Swear by Buffett's No-Split Rule (Views On News)

Sep 28, 2021

Just like Warren Buffett's Berkshire Hathaway, these Indian companies have not split their shares.

MRF's Multifold Jump in Bottomline Doesn't Excite Investors (Views On News)

Aug 10, 2021

Here's a rundown on MRF's June quarter results.

India's Top EV Battery Makers are set for Sky High Returns (Views On News)

Sep 30, 2021

These 5 leading EV battery makers are poised to transform India's EV ecosystem.

Amara Raja Batteries Dips 1% Even as Net Profit Doubles (Views On News)

Aug 16, 2021

The company's net profit doubled to Rs 1.2 bn on strong aftermarket demand across product segments.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Nov 26, 2021 (Close)